Working to Reduce Credit Card Debt? Start With These Two Steps

The average American household has $16,748 in credt card debt…

…which adds up to paying an average of $1,292 in credit card interest annually. Federal interest rate hikes could cause this figure to inch up futher, so it’s time to tackle the burden of credit card debt once and for all.

The Federal Reserve recently announced that it expects to raise interest rates three times in 2017. These rate hikes could affect interest rates on your credit cards, so now may be the perfect time to get serious about paying your credit cards off.

Here’s a two-step program to begin to reduce your debt:

Step 1

Do your homework. Start by pulling together all your recent credit card statements. Make a list of the balance you owe on each card, the interest rate, and the minimum payment due. Also note the amount of interest you were charged in the latest month.

Look back in your records and add up the balances from a year ago. If the total you owe has increased in the last year, it means you’re falling further behind. That’s even more incentive to focus on debt reduction.

Now figure out the total payment you can afford to make on your cards each month. Stretch you budget as far as possible. Note whether you can make more than the minimum payment. If not, you may need to get advice from a reputable nonprofit credit counseling service.

Step 2

Follow through on your plan. Make the largest payment your budget will allow on the card with the highest interest rate. Do what you can while staying current with the minimum payments on all your other cards. When the balance on the first card is paid off, don’t use it again. Move on to the card with the next highest interest rate. Meanwhile, make the commitment to use credit cards only when absolutely necessary and put any new charge on the card with the lowest interest rate.

Check your progress after a few months. If necessary, modify your plan and stretch your budget again to increase your payments. Paying off credit card debt takes time and isn’t easy, but you’ll be more prepared for potential economic uncertainty ahead.

Did you know several of Alloy Silverstein’s CPA team members are also Personal Financial Specialists? Meet the Team →

The information contained in this newsletter is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information or for assistance with any of your tax or business concerns, contact our office.

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